9 AUG 21 – Monday Market Highlights – Transcript

SUMMARY KEYWORDS

week, wage inflation, inflation, square, lockdowns, falling, biggest, addition, index, unsurprisingly, highlights, print, rba, starting, share, experienced, season, fortnight, entitlement, australian

SPEAKERS

Fraser Jack, Roland Houghton

Fraser Jack 

You’re listening to the Monday market highlights brought to you by Milford.

Roland Houghton 

Good morning. It’s Monday, the ninth of August and I’m rolling from Milford. The key economic data last week was definitely the non farm payrolls released in the US, which indicated 943,000 jobs are added compared to consensus estimates of 870,000. In addition to a strong July print both June and may were revised upwards highlighting the strengthening labor market in the US. average hourly earnings also increased 0.4% month on month first estimates of 0.3%. Taking full year wage inflation to 4%. The unemployment rate also fell to 5.4%. The RBA held their monthly meeting, and despite expectations they wouldn’t, they did confirm their intention to reduce quantitative easing from $5 billion a week to $4 billion a week. They highlighted the economy generally bounces back strongly out of lockdowns and you’re actually starting to see more hawkish commentary out of the RBA. The weekly ABS payroll and wage indices were release, with jobs falling 2.4% in the fortnight to the 17th of July. Unsurprisingly, New South Wales experienced the biggest employment decline with the payroll index falling 4.4%. Over the past fortnight, I know had a week to forget, with the iron ore price falling almost 20%. concerns were initially around a general slowdown in China. But this has evolved beyond that. With fears the Delta variant is really starting to take hold in China. There are moments more cities are getting shut down, which will impact demand for iron ore. The big equity news was the proposed takeover of afterpay by square, which would be the biggest corporate takeover in Australian history. If it is to proceed square will offer 0.375 shares for every afterpay share which values aren’t paid $140 versus pre announcement price of $96.70 Square is a fascinating business and the tie up makes sense logically, however, people will have to decide whether they want to own square shares we afterpay will be a much smaller component of the group. In addition, there are index considerations as undoubtedly a lot of the current afterpay market cap will move off shore points bit close its $400 million raise which will be used to fuel growth through a number of new states including a launch into Canada. The raise was split into an entitlement offer and a placement. The entitlement Was it $8 a share with the placement at $10 a share points bit close on Friday afternoon at $10 reporting season is in full swing in Australia and results have been quite strong to date. Unsurprisingly, you’re seeing cost inflation, particularly on labor and freight. We’re hearing that construction and mining companies are experiencing 10 to 15% wage inflation. In addition, skilled retail staff also seeing 10 to 15% wage increases in the week ahead. The key economic data is definitely the US inflation print. The market expects 0.4% month on month growth, which will take year on year inflation to 5.3%. This will arguably be the most watched economic data point globally this week, particularly on the back of the strong employment print last Friday. Domestically reporting season will continue to ramp up and we continue to look for anecdotes on how Australian companies are coping with cost inflation and the various lockdowns thanks for listening. We’ll see you next week.